PEBO Q4 Deep Dive: Commercial Loan Growth and Leasing Adjustments Shape Outlook

Regional banking company Peoples Bancorp (NASDAQ:PEBO) reported revenue ahead of Wall Streets expectations in Q4 CY2025, with sales up 5.2% year on year to $119.6 million. Its non-GAAP profit of $0.94 per share was 7% above analysts’ consensus estimates.

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StockStory’s Take

Peoples Bancorp delivered fourth quarter results that modestly exceeded Wall Street expectations, driven by robust commercial loan production and improvements in fee-based income. Management credited high demand from middle-market clients, particularly in the commercial and industrial segments, alongside progress in upgrading the quality of its small ticket leasing portfolio. CEO Tyler Wilcox noted that loan growth reached the top end of internal targets, despite ongoing payoffs and a deliberate reduction in riskier lease balances. CFO Katie Bailey highlighted stable efficiency ratios and tangible equity improvements, while also acknowledging that net charge-offs in the leasing business remained elevated as anticipated.

Looking ahead, management expects positive operating leverage in the coming year, with operating efficiency and credit discipline as central themes. The company is forecasting moderate loan growth, continued investment in technology, and a focus on hiring talent to support expansion. CEO Tyler Wilcox stated that commercial loan demand remains strong, underpinned by strategic hires and a disciplined credit approach. Meanwhile, the company plans to control asset growth to remain below regulatory thresholds unless acquisition opportunities arise. CFO Katie Bailey added, “We expect a slight reduction in net charge-offs for 2026 and continued efficiency improvements through technology integration and expense management.”

Key Insights from Management’s Remarks

Management attributed quarterly performance to strong commercial loan growth, careful portfolio management, and ongoing adjustments in leasing and fee-based businesses.

• Commercial loan production strength: Peoples Bancorp saw near-record commercial loan production, driven by demand in the commercial and industrial lending segment. Management credited recent team expansion and targeted hiring in key markets for this momentum.
• Leasing business repositioning: The company continued to wind down its small ticket leasing portfolio, resulting in an intentional decline in lease balances and elevated charge-offs. Management emphasized that no new originations are taking place in this segment, and that credit standards have been tightened to improve future quality.
• Efficiency and technology investments: Investments in new software and automation have led to process improvements across business lines. CEO Tyler Wilcox highlighted technology integration as a key driver of increased efficiency and operational oversight, especially as the company prepares for potential asset growth.
• Capital structure adjustments: Peoples Bancorp redeemed a tranche of subordinated debt acquired in a previous merger, incurring a one-time loss but securing lower-cost funding via Federal Home Loan Bank advances and brokered certificates of deposit. Management expects this move to generate annual savings and improve tangible book value earn-back.
• Fee-based income diversification: Gains in fee-based income were supported by increased lease income, deposit account service charges, and trust and investment activity. Management highlighted ongoing efforts to grow these lines, including exploring small insurance agency acquisitions and integrating lending with insurance services.

Drivers of Future Performance

Peoples Bancorp projects modest loan growth and stable margins, with performance driven by commercial lending, expense discipline, and ongoing technology investments.

• Commercial lending focus: Management believes robust commercial and industrial loan demand, supported by new hires and expanded business development, will be a primary growth engine. However, CEO Tyler Wilcox noted that anticipated payoffs and a cautious approach to credit standards may temper overall loan growth.
• Leasing portfolio charge-off moderation: The company expects charge-offs in its small ticket leasing segment to begin tapering off in the second half of 2026, following deliberate portfolio contraction and enhanced credit screening. CFO Katie Bailey indicated that provision for credit losses should decline, barring any material changes in the economic outlook.
• Expense and technology management: Continued investments in technology infrastructure and data warehousing are expected to drive efficiency improvements. Management views expense control as a lever to sustain positive operating leverage, even in a potentially lower interest rate environment.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will monitor (1) ongoing progress in reducing charge-offs and stabilizing the small ticket leasing portfolio, (2) the pace of commercial loan growth against anticipated payoffs and shifting credit conditions, and (3) tangible improvements from technology and process investments, especially as Peoples Bancorp approaches regulatory asset thresholds. The company's approach to M&A and potential insurance agency acquisitions will also be important to watch.

Peoples Bancorp currently trades at $31.75, up from $31.21 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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